How to Start a Beauty Salon Business
By the BizMove.com Team
Copyright © by BizMove.com. All rights reserved.
Other Free Books and Tools from BizMove.com That May Interest You:
* The Entrepreneur Quiz (Find Out whether You Have What it Takes to be an Entrepreneur)
* The Complete Guide to Running a Business (Everything You Need to Know to Start and
Manage Your Own Business)
* How to Improve Your Leadership and Management Skills (Effective Strategies for Business
Managers)
* Small Business Management (Essential Ingredients for Success)
* Business Plan Template (Complete Fill in the Blanks Sample Business Plan)
* How to Sharpen Your Managerial Skills (Good Management and Leadership Skills for
Aspiring Managers)
* How to Create a Marketing Plan For a Small Business (A Step by Step Guide to Marketing
Planning)
Table of Contents
1. Determining the Feasibility of Your New Business
2. Starting Your Business Step by Step
3. Complete Beauty Salon Business Plan Template
1. Determining the Feasibility of Your New Business
A. Preliminary Analysis
This guide is a checklist for the owner/manager of a business enterprise or for one
contemplating going into business for the first time. The questions concentrate on areas you
must consider seriously to determine if your idea represents a real business opportunity and if
you can really know what you are getting into. You can use it to evaluate a completely new
venture proposal or an apparent opportunity in your existing business.
Perhaps the most crucial problem you will face after expressing an interest in starting a new
business or capitalizing on an apparent opportunity in your existing business will be
determining the feasibility of your idea. Getting into the right business at the right time is simple
advice, but advice that is extremely difficult to implement. The high failure rate of new
businesses and products indicates that very few ideas result in successful business ventures,
even when introduced by well established firm. Too many entrepreneurs strike out on a
business venture so convinced of its merits that they fail to thoroughly evaluate its potential.
This checklist should be useful to you in evaluating a business idea. It is designed to help you
screen out ideas that are likely to fail before you invest extensive time, money, and effort in
them.
Preliminary Analysis
A feasibility study involves gathering, analyzing and evaluating information with the purpose of
answering the question: "Should I go into this business?" Answering this question involves first
a preliminary assessment of both personal and project considerations.
General Personal Considerations
The first seven questions ask you to do a little introspection. Are your personality
characteristics such that you can both adapt to and enjoy business ownership/management?
1. Do you like to make your own decisions?
2. Do you enjoy competition?
3. Do you have will power and self-discipline?
4. Do you plan ahead?
5. Do you get things done on time?
6. Can you take advise from others?
7. Are you adaptable to changing conditions?
The next series of questions stress the physical, emotional, and financial strains of a new
business.
8. Do you understand that owning your own business may entail working 12 to 16 hours a
day, probably six days a week, and maybe on holidays?
9. Do you have the physical stamina to handle a business?
10. Do you have the emotional strength to withstand the strain?
11. Are you prepared to lower your standard of living for several months or years?
12. Are you prepared to loose your savings?
Specific Personal Considerations
1. Do you know which skills and areas of expertise are critical to the success of your project?
2. Do you have these skills?
3. Does your idea effectively utilize your own skills and abilities?
4. Can you find personnel that have the expertise you lack?
5. Do you know why you are considering this project?
6. Will your project effectively meet your career aspirations
The next three questions emphasize the point that very few people can claim expertise in all
phases of a feasibility study. You should realize your personal limitations and seek appropriate
assistance where necessary (i.e. marketing, legal, financial).
7. Do you have the ability to perform the feasibility study?
8. Do you have the time to perform the feasibility study?
9. Do you have the money to pay for the feasibility study done?
General Project Description
1. Briefly describe the business you want to enter.
_______________
_______________
2. List the products and/or services you want to sell
_______________
3. Describe who will use your products/services
_______________
4. Why would someone buy your product/service?
_______________
5. What kind of location do you need in terms of type of neighborhood, traffic count, nearby
firms, etc.?
_______________
6. List your product/services suppliers.
_______________
7. List your major competitors - those who sell or provide like products/services.
_______________
_______________
8. List the labor and staff you require to provide your products/services. _______________
_______________
B. Requirements For Success
To determine whether your idea meets the basic requirements for a successful new project,
you must be able to answer at least one of the following questions with a "yes."
1. Does the product/service/business serve a presently unserved need?
2. Does the product/service/business serve an existing market in which demand exceeds
supply?
3. Can the product/service/business successfully compete with an existing competition
because of an "advantageous situation," such as better price, location, etc.?
Major Flaws
A "Yes" response to questions such as the following would indicate that the idea has little
chance for success.
1. Are there any causes (i.e., restrictions, monopolies, shortages) that make any of the
required factors of production unavailable (i.e., unreasonable cost, scare skills, energy,
material, equipment, processes, technology, or personnel)?
2. Are capital requirements for entry or continuing operations excessive?
3. Is adequate financing hard to obtain?
4. Are there potential detrimental environmental effects?
5. Are there factors that prevent effective marketing?
C. Desired Income
The following questions should remind you that you must seek both a return on your
investment in your own business as well as a reasonable salary for the time you spend in
operating that business.
1. How much income do you desire?
_______________
2. Are you prepared to earn less income in the first 1-3 years?
_______________
3. What minimum income do you require?
_______________
4. What financial investment will be required for your business?
_______________
5. How much could you earn by investing this money?
_______________
6. How much could you earn by working for someone else?
_______________
7. Add the amounts in 5 and 6. If this income is greater that what you can realistically expect
from your business, are you prepared to forego this additional income just to be your own boss
with the only prospects of more substantial profit/income in future years?
_______________
8. What is the average return on investment for a business of your type? _______________
D. Preliminary Income Statement
Besides return on investment, you need to know the income and expenses for your business.
You show profit or loss and derive operating ratios on the income statement. Dollars are the
(actual, estimated, or industry average) amounts for income and expense categories.
Operating ratios are expressed as percentages of net sales and show relationships of
expenses and net sales.
For instance 50,000 in net sales equals 100% of sales income (revenue). Net profit after taxes
equals 3.14% of net sales. The hypothetical "X" industry average after tax net profit might be
5% in a given year for firms with 50,000 in net sales. First you estimate or forecast income
(revenue) and expense dollars and ratios for your business. Then compare your estimated or
actual performance with your industry average. Analyze differences to see why you are doing
better or worse than the competition or why your venture does or doesn't look like it will float.
These basic financial statistics are generally available for most businesses from trade and
industry associations, government agencies, universities and private companies and banks
Forecast your own income statement. Do not be influenced by industry figures. Your estimates
must be as accurate as possible or else you will have a false impression.
1. What is the normal markup in this line of business. i.e., the dollar difference between the
cost of goods sold and sales, expressed as a percentage of sales?
_______________
2. What is the average cost of goods sold percentage of sales?
_______________
3. What is the average inventory turnover, i.e., the number of times the average inventory is
sold each year?
_______________
4. What is the average gross profit as a percentage of sales?
_______________
5. What are the average expenses as a percentage of sales?
_______________
6. What is the average net profit as a percent of sales?
_______________
7. Take the preceding figures and work backwards using a standard income statement format
and determine the level of sales necessary to support your desired income level.
_______________
8. From an objective, practical standpoint, is this level of sales, expenses and profit
attainable?
_______________
E. Market Analysis
The primary objective of a market analysis is to arrive at a realistic projection of sales. after
answering the following questions you will be in a better positions to answer question eight
immediately above.
Population
1. Define the geographical areas from which you can realistically expect to draw customers.
_______________
2. What is the population of these areas?
_______________
3. What do you know about the population growth trend in these areas? _______________
4. What is the average family size?
_______________
5. What is the age distribution?
_______________
6. What is the per capita income?
_______________
7. What are the consumers' attitudes toward business like yours?
_______________
8. What do you know about consumer shopping and spending patterns relative to your type of
business?
_______________
9. Is the price of your product/service especially important to your target market?
_______________
10. Can you appeal to the entire market?
_______________
11. If you appeal to only a market segment, is it large enough to be profitable?
_______________
F. Competition
1. Who are your major competitors?
_______________
2. What are the major strengths of each?
_______________
3. What are the major weaknesses of each?
_______________
4. Are you familiar with the following factors concerning your competitors:
Price structure?
_______________
Product lines (quality, breadth, width)?
_______________
Location?
_______________
Promotional activities?
_______________
Sources of supply?
_______________
Image from a consumer's viewpoint?
_______________
5. Do you know of any new competitors?
_______________
6. Do you know of any competitor's plans for expansion?
_______________
7. Have any firms of your type gone out of business lately?
_______________
8. If so, why?
_______________
9. Do you know the sales and market share of each competitor?
_______________
10. Do you know whether the sales and market share of each competitor are increasing,
decreasing, or stable?
_______________
11. Do you know the profit levels of each competitor?
_______________
12. Are your competitors' profits increasing, decreasing, or stable?
_______________
13. Can you compete with your competition?
_______________
G. Sales
1. Determine the total sales volume in your market area.
_______________
2. How accurate do you think your forecast of total sales is?
_______________
3. Did you base your forecast on concrete data?
_______________
4. Is the estimated sales figure "normal" for your market area?
_______________
5. Is the sales per square foot for your competitors above the normal average?
_______________
6. Are there conditions, or trends, that could change your forecast of total sales?
_______________
7. Do you expect to carry items in inventory from season to season, or do you plan to mark
down products occasionally to eliminate inventories? If you do not carry over inventory, have
you adequately considered the effect of mark-down in your pricing? (Your gross profits margin
may be too low.)
_______________
8. How do you plan to advertise and promote your product/service/business?
_______________
9. Forecast the share of the total market that you can realistically expect - as a dollar amount
and as a percentage of your market.
_______________
10. Are you sure that you can create enough competitive advantages to achieve the market
share in your forecast of the previous question?
_______________
11. Is your forecast of dollar sales greater than the sales amount needed to guarantee your
desired or minimum income?
_______________
12. Have you been optimistic or pessimistic in your forecast of sales? _______________
13. Do you need to hire an expert to refine the sales forecast?
_______________
14. Are you willing to hire an expert to refine the sales forecast?
_______________
H. Supply
1. Can you make a list of every item of inventory and operating supplies needed?
2. Do you know the quantity, quality, technical specifications, and price ranges desired?
3. Do you know the name and location of each potential source of supply?
4. Do you know the price ranges available for each product from each supplier?
5. Do you know about the delivery schedules for each supplier?
6. Do you know the sales terms of each supplier?
7. Do you know the credit terms of each supplier?
8. Do you know the financial condition of each supplier?
9. Is there a risk of shortage for any critical materials or merchandise?
10. Are you aware of which supplies have an advantage relative to transportation costs?
11. Will the price available allow you to achieve an adequate markup?
I. Expenses
1. Do you know what your expenses will be for: rent, wages, insurance, utilities, advertising,
interest, etc?
2. Do you need to know which expenses are Direct, Indirect, or Fixed?
3. Do you know how much your overhead will be?
4. Do you know how much your selling expenses will be?
Miscellaneous
1. Are you aware of the major risks associated with your product? Service Business?
2. Can you minimize any of these major risks?
3. Are there major risks beyond your control?
4. Can these risks bankrupt you? (fatal flaws)
J. Venture Feasibility
1. Are there any major questions remaining about your proposed venture?
2. Do the above questions arise because of a lack of data?
3. Do the above questions arise because of a lack of management skills?
4. Do the above questions arise because of a "fatal flaw" in your idea?
5. Can you obtain the additional data needed?
Go to Top
2. Starting Your Business Step by Step
Things to Consider Before You Start
This guide will walk you step by step through all the essential phases of starting a successful
retail business. To profit in a retail business, you need to consider the following questions:
What business am I in? What goods do I sell? Where is my market? Who will buy? Who is my
competition? What is my sales strategy? What merchandising methods will I use? How much
money is needed to operate my store? How will I get the work done? What management
controls are needed? How can they be carried out? Where can I go for help?
As the owner, you have to answer these questions to draw up your business plan. The pages
of this Guide are a combination of text and suggested analysis so that you can organize the
information you gather from research to develop your plan, giving you a progression from a
common sense starting point to a profitable ending point.
What Is a Business Plan?
The success of your business depends largely upon the decisions you make. A business plan
allocates resources and measures the results of your actions, helping you set realistic goals
and make logical decisions.
You may be thinking, "Why should I spend my time drawing up a business plan? What's in it
for me?" If you've never worked out a plan, you are right in wanting to hear about the possible
benefits before you do the work. Remember first that the lack of planning leaves you poorly
equipped to anticipate future decisions and actions you must make or take to run your
business successfully. A business plan Gives you a path to follow. A plan with goals and action
steps allows you to guide your business through turbulent often unforeseen economic
conditions.
A plan shows your banker the condition and direction of your business so that your business
can be more favorably considered for a loan because of the banker's insight into your situation.
A plan can tell your sales personnel, suppliers, and others about your operations and goals.
A plan can help you develop as a manager. It can give you practice in thinking and figuring out
problems about competitive conditions, promotional opportunities and situations that are good
or bad for your business. Such practice over a period of time can help increase an ownermanager's ability to make judgments.
A second plan tells you what to do and how to do it to achieve the goals you have set for your
business.
What Business Am I In?
In making your business plan, the first question to consider is: What business am I really in? At
first reading, this question may seem silly. "If there is one thing I know," you say to yourself, "it
is what business I'm in." Hold on and think. Some owner-managers have gone broke and
others have wasted their savings because they did not define their businesses in detail.
Actually they were confused about what business they were in.
Look at an example. Mr. Jet maintained a dock and sold and rented boats. He thought he was
in the marina business. But when he got into trouble and asked for outside help, he learned
that he was not necessarily in the marina business. He was in several businesses. He was in
the restaurant business with a dockside cafe, serving meals to boating parties. He was in the
real estate business, buying and selling lots. He was in boat repair business, buying parts and
hiring a mechanic as demand rose. Mr. Jet was trying to be too many things and couldn't
decide which venture to put money into and how much return to expect. What slim resources
he had were fragmented.
Before he could make a profit on his sales and a return on his investment, Mr. Jet had to
decide what business he really was in and concentrate on it. After much study, he realized that
he should stick to the marina format, buying, selling, and servicing boats.
Decide what business you are in and write it down - define your business.
To help you decide, think of answers to questions like: What do you buy? What do you sell?
Which of your lines of goods yields the greatest profit? What do people ask you for? What is it
that you are trying to do better or more of or differently from your competitors? Write it down in
detail.
Planning Your Marketing
When you have decided what business you are in, you are ready to consider another important
part of you business plan. Marketing. Successful marketing starts with the owner-manager.
You have to know the merchandise you sell and the wishes and wants of your customers you
can appeal to. The objective is to move the stock off the shelves and display racks at the right
price and bring in sales dollars.
The text and suggested working papers that follow are designed to help you work out a
marketing plan for your store.
Determining the Sales Potential
In retail business, your sales potential depends on location. Like a tree, a store has to draw its
nourishment from the area around it. The following questions should help you work through the
problem of selecting a profitable location.
In what part of the city or town will you locate?
In the downtown business section?
In the area right next to the downtown business area?
In a residential section of the town?
On the highway outside of town?
In the suburbs?
In a suburban shopping center?
On a worksheet, write where you plan to locate and give your reasons why you chose that
particular location.
Now consider these questions that will help you narrow down a place in your location area.
What is the competition in the area you have picked?
How many of the stores look prosperous?
How many look as though they are barely getting by?
How many similar stores went out of business in this area last year?
How many new stores opened up in the last year?
What price line does competition carry?
Which store or stores in the area will be your biggest competitors?
Again, write down the reasons for your opinions. Also write out an analysis of the area's
economic base and give the reason for your opinion. Is the area in which you plan to locate
supported by a strong economic base? For example, are nearby industries working full time?
Only part time? Did any industries go out of business in the past several months? Are new
industries scheduled to open in the next several months?
When you find a store building that seems to be what you need, answer the following
questions:
Is the neighborhood starting to get run down?
Is the neighborhood new and on the way up? (The local Chamber of Commerce may have
census data for your area. Census Tracts on Population, published by the Bureau of Census,
may be useful. Other sources on such marketing statistics are trade associations and
directories).
Are there any super highways or through-ways planned for the neighborhood?
Is street traffic fairly heavy all day?
How close is the building to bus lines and other transportation?
Are there adequate parking spaces convenient to your store?
Are the sidewalks in good repair (you may have to repair them)?
is the street lighting good?
Is your store on the sunny side of the street?
What is the occupancy history of this store building? Does the store have a reputation for
failures? (Have stores opened and closed after a short time)?
Why have other businesses failed in this location?
What is the physical condition of the store?
What service does the landlord provide?
What are the terms of the lease?
How much rent must you pay each month?
Estimate the gross annual sales you expect in this location.
When you think you have finally solved the site location question, ask your banker to
recommend people who know most about location in your line of business. Contact these
people and listen to their advice and opinions, weigh what they say, then decide.
How to Attract Customers
When you have a location in mind, you should work through another aspect of marketing. How
will you attract customers to your store? How will you pull business away from your
competition?
It is in working with this aspect of marketing that many retailers find competitive advantages.
The ideas that they develop are as good as and often better than those that large companies
develop. The work blocks that follow are designed to help you think about image, pricing,
customer service policies, and advertising.
Image
A store has an image whether or not the owner is aware of it. For example, throw some
merchandise onto shelves and onto display tables in a dirty, dimly lit store and you've got an
image. Shoppers think of it as a dirty, junky store and avoid coming into it. Your image should
be concrete enough to promote in your advertising and other promotional activities. For
example, "home-cooked" food might be the image of a small restaurant.
Write out on a worksheet the image that you want shoppers and customers to have of your
store.
Pricing
Value received is the key to pricing. The only way a store can have low prices is to sell lowpriced merchandise. Thus, what you do about the prices you charge depends on the lines of
merchandise you buy and sell. It depends also on what your competition charges for these
lines of merchandise. Your answers to the following questions should help you to decide what
to do about pricing.
In what price ranges are your line of merchandise sold
High _____ , Medium _________, or Low _____?
Will you sell for cash only?
What services will you offer to justify your prices if they are higher than your competitor's
prices?
If you offer credit, will your price have to be higher than if all sales are for cash? The credit
costs have to come from somewhere. Plan for them.
If you use credit card systems, what will it cost you? Will you have to add to your prices to
absorb this cost.
Customer Service Policies
The service you provide your customers may be free to them, but you pay for it. For example,
if you provide free parking, you pay for your own parking lot or pick up your part of the cost of a
lot you share with other retailers.
Make a list of the services that your competitors offer and estimate the cost of each service.
How many of these services will you have to provide just to be competitive? Are there other
services that would attract customers but that competitors are not offering? If so, what are your
estimates of the cost of such services? Now list all the services you plan to offer and the
estimated costs. Total this expense and figure out how you can include those added costs in
your prices without pricing your merchandise out of the market.
Planning Your Advertising Activities
Advertising was saved until the last because you have to have something to say before
advertising can be effective. When you have an image, price range, and customer services,
you are ready to tell prospective customers why they should shop in your store.
When the money you can spend for advertising is limited, it is vital that your advertising be on
target. Before you think about how much money you can afford for advertising, take time to
determine what jobs you want to do for your store. List what makes your store different from
your competitors. List the facts about your store and its merchandise that your advertising
should tell shoppers and prospective customers.
When you have these facts listed and in hand, you are ready to think about the form your
advertising should take and its cost. Ask the local media (newspapers, radio and television,
and printers of direct mail pieces) for information about the services and results they offer for
your money.
How you spend advertising money is your decision, but don't fall into the trap that snares many
advertisers who have little or no experience with advertising copy and media selection.
Advertising is a profession. Don't spend a lot of money on advertising without getting
professional advice on what kind and how much advertising your store needs.
The following work sheet can be useful in determining what advertising is needed to sell your
strong points to prospective customers.
When you have a figure on what your advertising for the next twelve months will cost, check it
against what similar stores spend. Advertising expense is one of the operating ratios
(expenses as a percentage of sales) that trade associations and other organizations gather. If
your estimated cost for advertising is substantially higher than this average for your line of
merchandise, take a second look. No single expense item should be allowed to get way out of
line if you want to make a profit. Your task in determining how much to spend for advertising
comes down to the question, "How much can I afford to spend and still do the job that needs to
be done?"
In-store Sales Promotion
To complete your work on marketing, you need to think about what you want to happen after
prospects get inside your store. Your goal is to move stock off your shelves and displays at a
profit and satisfy your customers. You want repeat customers and money in your cash register.
At this point, if you have decided to sell for cash only, take a second look at your decision.
Don't overlook the fact that Americans like to buy on credit. Often a credit card, or other system
of credit and collections, is needed to attract and hold customers. Customers will have more
buying confidence and be more comfortable in your store if they know they can afford to buy.
Credit makes this possible.
To encourage people to buy, self-service stores rely on layout, attractive displays, signs and
clearly marked prices on the items offered for sale. Other stores combine these techniques
with personal selling.
List the display counters, racks, special equipment (something peculiar to your business like a
frozen food display bin or a machine to measure and cut cloth), and other fixtures. Figure the
cost of all fixtures and equipment by listing them on a worksheet as follows:
Draw several layouts of your store and attach the layout that suits you to the cost worksheet.
Determine how many signs you may need for a twelve month operation and estimate that cost
also.
If your store is a combination of self-service and personal selling, how many sales persons and
cashiers will you need? Estimate, I will need ________ sales persons at $ ________ each
week (include payroll taxes and insurance in this salaries cost). In a year, salaries will cost:
_________.
Personal attention to customers is one strong point that a store can use as a competitive tool.
You want to emphasize in training employees that everyone has to pitch in and get the job
done. Customers are not interested in job descriptions, but they are interested in being served
promptly and courteously. Nothing is more frustrating to a customer than being ignored by an
employee. Decide what training you will give your sales people in the techniques of how to
greet customers, show merchandise, suggest other items, and handle customer needs and
complaints.
Buying
When buying merchandise for resale, you need to answer questions such as:
Who sells the line to retailers? Is it sold by the manufacturer directly or through wholesalers
and distributors?
What delivery service can you get and must you pay shipping charges?
What are the terms of buying?
Can you get credit?
How quickly can the vendor deliver fill-in orders?
You should establish a source of supply on acceptable terms for each line of merchandise and
estimate a plan for purchasing as follows:
(1) How many days or weeks does it take the supplier to deliver the merchandise to your
store.
(2) Who pays? You, the buyer? The supplier? Freight or transportation costs are a big expense
item.
(3) What is the supplier's policy on fill-in orders? That is, do you have to buy a gross, a dozen,
or will the supplier ship only two or three items? How long does it take for the delivery to get
into your store?
Stock Control
Often shoppers leave without buying because the store did not have the items they wanted or
the sizes and colors were wrong. Stock control, combined with suppliers whose policies on fillin orders are favorable to you, provides a way to reduce "walkouts".
The type of system you use to keep informed about your stock, or inventory, depends on your
line of merchandise and the delivery dates provided by your suppliers.
Your stock control system should enable you to determine what needs to be ordered on the
basis of: (1) what is on hand, (2) what is on order, and (3) what has been sold. Some trade
associations and suppliers provide systems to members and customers, otherwise your
accountant can set up a system that is best for your business. Inventory control is based upon
either a perpetual or a periodic method of accounting that involves cost considerations as well
as stock control. When you have decided what system you will use to control stock, estimate
its cost. You may not need an extensive (and expensive) control system because you do not
need the detailed information such a system collects. The system must justify its costs or you
will just waste money and time on a useless effort.
Stock Turnover
When an owner-manager buys reasonably well, you can expect to turnover stock several times
a year. For example, the stock in a small camera shop should turnover four times to four and a
half times a year. What is the average stock turnover per year of your line of merchandise?
How many times do you expect your stock to turnover? List the reasons for your estimate.
Behind-the-Scenes Work
In a retail store, behind-the-scenes work consists of the receiving of merchandise, preparing it
for display, maintaining display counters and shelves, and keeping the store clean and
attractive to customers. The following analytical list will help you decided what to do and the
cost of those actions.
First list the equipment (for example a marking machine for pricing, shelves, a cash register)
you will need for: (1) receiving merchandise (2) preparing merchandise for display, (3)
maintaining display counters and shelves, and (4) keeping the store clean. Next list the
supplies you will need for a year, for example, brooms, price tags, and business forms.
Use this format to figure these costs:
Who will do the back-room work and the cleaning that is needed to make a smooth operation
in the store? If you do it yourself, how many hours a week will it take you? Will you do these
chores after closing? If you use employees, what will they cost? On a worksheet describe how
you plan to handle these tasks. For example:
Back-room work will be done by one employee during the slack sales times of the day. I
estimate that the employee will spend _______ hours per week on these tasks and will cost
________ (number of hours times hourly wages) per week and _____ per year.
I will need ________ square feet of space for the back-room operation. This space will cost
_______ per square foot or a total of ________ per month.
List and analyze all expense items in the same manner. Examples are utilities, office help,
insurance, telephone, postage, accountant, payroll taxes, and licenses or other local taxes. If
you plan to hire others to help manage, analyze these salaries.
How Much Money Will You Need
At this point, take some time to think about what your business plan means in terms of dollars.
This section is designed to help you put your plan into dollars.
The first question concerns the source of dollars. After your initial capital investments in a retail
store, the main source of money is sales. What sales volume do you expect to do in the first
twelve months? Write your estimate here ________, and justify your estimate.
*Transfer your figures from previous worksheets.
Whether you have the funds (say in savings) or borrow the money, your new business will
have to pay back start-up costs. Keep this fact in mind as you work on estimating expenses
and on other financial aspects of your plan.
Expenses
In connection with annual sales volume you need to think about expenses. If, for example, you
plan to do sales amounting to $100,000, what will it cost you to do this amount of business?
How much profit will you make? A business must make a profit or close.
The following exercise will help you to make an estimate of your expenses. To do this exercise
you need to know the total cost of goods sold for your line of merchandise for the period
(month or year) that you are analyzing. Cost of goods sold is expressed as a percentage of
sales and is called an operating ratio. Check with your trade association to get the operating
ratios for your business's. The following is the format for an Income Statement with operating
ratios substituted for dollar amounts.
Now using your operating ratio for cost of goods sold and your estimated Sales Revenue, you
can breakdown your expenses by substituting your ratios and dollar amounts in the Income
Statement.
Notice that Gross Margin must be large enough to provide for your expenses and profit.
and continue to fill out the entire Income Statement. Work out statements monthly or for the
year.
Cash Forecast
A budget helps you to see the dollar amount of your expected revenue and expenses each
month. Then from month to month the question is: Will sales bring in enough money to pay for
the store's bills? The owner-manager must prepare for the financial peaks and valleys of the
business cycle. A cash forecast is a management tool that can eliminate much of the anxiety
that can plague you if your sales go through lean months. Use the following format.
Is Additional Money Needed? Suppose at this point that your business needs more money
than can be generated by present sales. What do you do? If your business has great potential
or is in good financial condition, as shown by its balance sheet, you will borrow money (from a
bank most likely) to keep the business operating during start-up and slow sales periods. The
loan can be repaid during the fat sales months when sales are greater than expenses.
Adequate working capital is needed for success and survival; but cash on hand (or the lack of
it) is not necessarily an indication that the business is in bad financial shape. A lender will look
at your balance sheet to see the business's Net Worth of which cash and cash flow are only a
part. The balance sheet statement shows a business's Net Worth (financial position) at a given
point in time, say at the close of business at the end of the month or at the end of the year.
Free Retail Business Plan How To.
Even if you do not need to borrow money you may want to show your plan and balance sheet
to your banker. It is never too early to build good relations and credibility (trust) with your
banker. Let your banker know that you are a manager who knows where you want to go rather
than someone who merely hopes to succeed.
Control and Feedback
To make your plan work you need feedback. For example, the year-end profit and loss
(income) statement shows whether your business made a profit or took a loss for the past
twelve months.
Don't wait twelve months for the score. To keep your plan on target you need readings at
frequent intervals. An income statement compiled at the end of each month or at the end of
each quarter is one type of frequent feedback. Also you must set up management controls that
help you insure that the right things are done each day and week. Organization is needed
because you as the owner-manager cannot do all the work. You must delegate work,
responsibility, and authority. The record keeping systems should be set up before the store
opens. After you're in business it is too late.
The control system that you set up should give you information about stock, sales, receipts
and disbursement. The simpler the accounting control system, the better. Its purpose is to give
you current useful information. You need facts that expose trouble spots. Outside advisers,
such as accountants can help.
Stock Control
The purpose of controlling stock is to provide maximum service to your customers. Your aim
should be to achieve a high turnover rate on your inventory. The fewer dollars you tie up in
stock, the better.
In a store, stock control helps the owner-manager offer customers a balanced assortment and
enables you to determine what needs ordering on the basis of (1) what is on hand, (2) what is
on order, and (3) what has been sold.
When setting up inventory controls, keep in mind that the cost of the stock is not your only
cost. There are inventory costs, such as the cost of purchasing, the cost of keeping stock
control records, and the cost of receiving and storing stock.
Sales
In a store, sales slips and cash register tapes give the owner-manager feedback at the end of
each day. To keep on top of sales, you need answers to questions, such as: How many sales
were made? What was the dollar amount? What were the best selling products? At what
price? What credit terms were given to customers?
Receipts
Break out your receipts into receivables (money still owned such as a charge sale) and cash.
You know how much credit you have given, how much more you can give, and how much cash
you have with which to operate.
Disbursement
Your management controls should also give you information about the dollars your company
pays out. In checking on your bills, you do not want to be penny-wise and pound-foolish. You
should pay bills on time to take advantage of supplier discounts. Your review systems should
also give you the opportunity to make judgments on the use of the funds. In this manner, you
can be on top of emergencies as well as routine situations. Your system should also keep you
aware that tax monies, such as payroll income tax deductions, must be set aside and paid out
at the proper time.
Break-Even Analysis
Break-even analysis is a management control device that approximates how much you must
sell in order to cover your costs with no profit and no loss. Profit comes after break-even.
Profit depends on sales volume, selling price, and costs. Break-even analysis helps you to
estimate what a change in one or more of these factories will do to your profit. To figure a
break-even point, fixed costs (like rent) must be separated from variable costs (like the cost of
goods sold).
The break-even formula is:
Sample break-even calculations: Bill Mason plans to open a shoe store and estimates his fixed
expenses at about $9,000 the first year. He estimates variable expenses of about $700 for
every $1,000 of sales. How much must the store gross to break-even?
Is Your Plan Workable?
Stop when you have worked out your break-even point. Whether the break-even point looks
realistic or way off base, it is time to make sure that your plan is workable.
Take time to re-examine your plan before you back it with money. If the plan is not workable,
better to learn it now than to realize six months down the road that you are pouring money into
a losing venture.
In reviewing your plan, look at the cost figures you drew up when you broke down your
expenses for the year (operating ratios on the income statement). If any of your cost items are
too high or too low, change them. You can write your changes above or below your original
entries on the worksheet. When you finish making your adjustments, you will have a revised
projected statement of sales and expenses.
With your revised figures, work out a revised break-even analysis. Whether the new breakeven point looks good or bad, take one more precaution. Show your plan to someone who has
not been involved in working out the details with you. Get an impartial. knowledgeable second
opinion. Your banker, or other advisor may see weaknesses that failed to appear as you went
over the plan details. These experts may see strong points that your plan should emphasize.
Put Your Plan Into Action
When your plan is as thorough and accurate as possible you are ready to put it into action.
Keep in mind that action is the difference between a plan and a dream. If a plan is not acted
upon, it is of no more value than a wishful dream. A successful owner-manager does not stop
after gathering information and drawing up a business plan, as you have done in working
through this Guide. use the plan.
At this point, look back over your plan. Look for things that must be done to put your plan into
action. What needs to be done will depend on your situation and goals. For example, if your
business plan calls for an increase in sales, you may have to provide more funds for this
expansion. Have you more money to put into this business? Do you borrow from friends and
relatives? From your bank? From your suppliers (through credit terms?) If you are starting a
new business, one action may be to get a loan for fixtures, stock, employee salaries, and other
expenses. Another action will be to find and to hire capable employees.
Now make a list of things that must be done to put your plan into action. Give each item a date
so that it can be done at the appropriate time.
To put my plan into action, I must:
1. Do (action) _________ By _________(date)
2. etc.
Keep Your Plan Current
Once you put your plan into action, look out for changes. They can cripple the best business
no matter how well planned. Stay on top of changing conditions and adjust your business plan
accordingly. Sometimes the change is within your company. For example, several of your
sales persons may quit. Sometimes the change is with the customers whose desires and
tastes shift and change or refuse to change. Sometimes the change is technological as when
products are created and marketed.
In order to adjust your plan to account for such changes, you the owner-manager, must:
Be alert to the changes that come about in your line of business, in your market, and in your
customers.
Check your plan against these changes.
Determine what revisions, if any, are needed in the business plan.
The method you use to keep your plan current so that your business can weather the changing
forces of the market place is up to you. Read trade and business papers and magazines and
review your plan periodically. Once each month or every other month, go over your plan to see
whether or not it needs adjusting. Certainly you will have more accurate dollar amounts to work
with after you have been in business for a time. Make revisions and put them into action. You
must be constantly updating and improving. A good business plan must evolve from
experience and the best current information. A good business plan is good business.
Go to Top
3. Complete Beauty Salon Business Plan Template
Table of Contents
1.0 Executive Summary ........................................................................................................... 28
1.1 Objectives .......................................................................................................................... 28
1.2 Mission ............................................................................................................................... 28
1.3 Keys to Success ................................................................................................................. 30
2.0 Company Summary............................................................................................................ 30
2.1 Company Ownership .......................................................................................................... 30
2.2 Start-up Summary .............................................................................................................. 31
Table: Start-up ......................................................................................................................... 31
3.0 Products and Services ....................................................................................................... 32
4.0 Market Analysis Summary .................................................................................................. 32
4.1 Market Segmentation ......................................................................................................... 33
Table: Market Analysis ............................................................................................................. 33
4.2 Target Market Segment Strategy ....................................................................................... 34
4.3 Service Business Analysis ................................................................................................. 34
4.3.1 Competition and Buying Patterns .................................................................................... 34
5.0 Strategy and Implementation Summary ............................................................................. 35
5.1 Competitive Edge ............................................................................................................... 35
5.2 Marketing Strategy ............................................................................................................. 35
5.3 Sales Strategy .................................................................................................................... 36
5.3.1 Sales Forecast ................................................................................................................ 36
Table: Sales Forecast .............................................................................................................. 36
5.4 Milestones .......................................................................................................................... 38
Table: Milestones ..................................................................................................................... 38
6.0 Management Summary ...................................................................................................... 40
6.1 Personnel Plan ................................................................................................................... 40
Table: Personnel ...................................................................................................................... 40
7.0 Financial Plan ..................................................................................................................... 41
7.0 Financial Plan ..................................................................................................................... 41
7.1 Start-up Funding................................................................................................................. 41
Table: Start-up Funding............................................................................................................ 41
7.2 Important Assumptions....................................................................................................... 43
7.3 Break-even Analysis........................................................................................................... 44
Table: Break-even Analysis ...................................................................................................... 44
7.4 Projected Profit and Loss ................................................................................................... 45
Table: Profit and Loss .............................................................................................................. 45
7.5 Projected Cash Flow .......................................................................................................... 49
Table: Cash Flow ..................................................................................................................... 49
7.6 Projected Balance Sheet .................................................................................................... 52
Table: Balance Sheet ............................................................................................................... 52
7.7 Business Ratios.................................................................................................................. 54
7.7 Business Ratios.................................................................................................................. 54
Table: Ratios ............................................................................................................................ 54
1.0 Executive Summary
COMPANY NAME is a full-service beauty salon dedicated to consistently providing high
customer satisfaction by rendering excellent service, quality products, and furnishing an
enjoyable atmosphere at an acceptable price/value relationship. The company will also
maintain a friendly, fair, and creative work environment, which respects diversity, ideas,
and hard work.
Mission: To supply services and products that enhances our clients' physical
appearance and mental relaxation.
To achieve the company's objectives, COMPANY NAME is seeking grant funding in the
amount of $150,000. This grant will be attained and used to pay for building expenses,
equipment, supplies and inventory of the salon located in Lake City, Tennessee.
1.1 Objectives
COMPANY NAME’s objectives for the first three years of operation include:
•
The creation of a unique, upscale, innovative environment that will differentiate
COMPANY NAME from other local beauty salons.
•
Educating the community on what the company has to offer.
•
The formation of an environment that will bring people together in a common forum.
•
Excellent service and beauty retail items at a reasonable price.
1.2 Mission
COMPANY NAME aims to offer excellent and superior service at all times. Close
personal attention to customer is essential to providing a quality experience for
customers; therefore, adequate personnel will be hired to ensure each customer has the
proper attention in the COMPANY NAME salon.
1.3 Keys to Success
The keys to success in our business are:
•
Location: providing an easily accessible location for customers.
•
Environment: providing an environment conducive to giving relaxing and
professional service.
•
Convenience: offering clients a wide range of services in one setting, and extended
business hours.
•
Reputation: reputation of the owner and other "beauticians" as providing superior
personal service.
2.0 Company Summary
COMPANY NAME will, upon commencement of operations, sell a wide range of beauty
services and products. The company will provide quality hair services, along with top
lines of beauty products. What will set COMPANY NAME apart from the competition
is the company's commitment to providing all of these services in one convenient
location.
2.1 Company Ownership
COMPANY NAME is a sole proprietorship registered DBA by owner OWNER’S NAME
in Lake City, Tennessee. Some thought has been given to incorporating COMPANY
NAME, but a decision has not yet been reached.
2.2 Start-up Summary
After spending several months searching for a salon to purchase, the owners decided to
start a salon from the ground up. The start-up capital will be used for the design,
leasehold improvements, and equipment of the salon.
Table: Start-up
Start-up
Requirements
Start-up Expenses
Rent deposit
$1,817
Inventory
$2,000
Equipment
$75,000
Supplies
$20,000
Advertising
$10,000
Insurance
$5,000
Building Expense
$25,000
Total Start-up Expenses
$138,817
Start-up Assets
Cash Required
$500
Other Current Assets
$0
Long-term Assets
$0
Total Assets
$500
Total Requirements
$139,317
3.0 Products and Services
COMPANY NAME is considered an upscale full-service beauty salon. The company will
offer a wide range of services that include:
•
Hair: cuts, relaxers, perms, colors, shampoo, conditioning, curling, reconstructing,
weaving, and waving.
•
Skin Care: European facials and body waxing.
4.0 Market Analysis Summary
As of the census of 2008, there were 1,888 people, 815 households, and 485 families
residing in the town. The population density was 1,186.1 people per square mile
(458.5/km²). There were 900 housing units at an average density of 565.4/sq mi
(218.5/km²). The racial makeup of the town was 98.78% White, 0.11% African
American, 0.48% Native American, 0.16% Asian, 0.26% from other races, and 0.21%
from two or more races. Hispanic or Latino of any race was 0.42% of the population.
There were 815 households out of which 27.9% had children under the age of 18 living
with them, 38.7% were married couples living together, 16.9% had a female
householder with no husband present, and 40.4% were non-families. 37.3% of all
households were made up of individuals and 19.5% had someone living alone who was
65 years of age or older. The average household size was 2.17 and the average family
size was 2.84.
In the town the population was spread out with 21.9% under the age of 18, 5.9% from
18 to 24, 24.8% from 25 to 44, 23.8% from 45 to 64, and 23.5% who were 65 years of
age or older. The median age was 43 years. For every 100 females there were 78.4
males. For every 100 females age 18 and over, there were 71.3 males.
The median income for a household in the town was $14,844, and the median income
for a family was $21,895. Males had a median income of $25,469 versus $17,115 for
females. The per capita income for the town was $10,615. About 31.8% of families and
32.0% of the population were below the poverty line, including 31.7% of those under
age 18 and 23.7% of those age 65 or over.
Lake City is a town just outside of Knoxville, Tennessee. Founded in 1786, Knoxville is
the third-largest city in the U.S. state of Tennessee, behind Memphis and Nashville, and
is the county seat of Knox County. It is also the largest city in East Tennessee. As of
the 2000 United States Census, Knoxville had a total population of 173,890; the July
2007 estimated population was 183,546. Knoxville is the principal city of the Knoxville
Metropolitan Statistical Area with a metro population of 655,400, which is in turn the
central component of the Knoxville-Sevierville-La Follette Combined Statistical Area
with 1,029,155 residents.
There are very few beauty salons in the city of Lake City, Tennessee. COMPANY
NAME is confident that the company can offer superior services and products to the city
and to the surrounding areas.
4.1 Market Segmentation
COMPANY NAME has identified two market segments as follows:
1. Local clientele
2. Out of town/Traveling clientele
COMPANY NAME feels that the most important target market is the local clientele from
Lake City, Tennessee; however, the company is seeking to advertise to the surrounding
areas and make widely know that COMPANY NAME is the best in the business. In
addition, the company is seeking to be known as the best salon in town by providing
excellent service and products to each and every customer, which promotes word-ofmouth advertising.
Table: Market Analysis
Market Analysis
2011
Potential
Customers
Growth
Local Customers
5%
2012
2013
2014
2015
CAGR
1,888
1,982
2,081
2,185
2,294
4.99%
Out of Town
Customers
5%
35,665
37,448
39,320
41,286
43,350
5.00%
Total
5.00%
37,553
39,430
41,401
43,471
45,644
5.00%
4.2 Target Market Segment Strategy
Referral marketing is the key type of marketing strategy utilized. Maintaining and further
enhancing its reputation in the community is crucial to gaining additional market share
of the company's target markets.
4.3 Service Business Analysis
The beauty salon business is lucrative, as mentioned before. As a result, there are
many centers that provide beauty salon services for customers in the same area as
COMPANY NAME will compete with the small beauty salons, and this is where the main
competition lies. The company is confident that this will be a successful venture
because of the quality of its managers and the capability of its beauty technicians, which
is mentioned in more detail in the Personnel section.
4.3.1 Competition and Buying Patterns
The key element in purchase decisions made at the COMPANY NAME client level is
trust in the professional reputation and reliability of the beauty salon.
5.0 Strategy and Implementation Summary
Skill at what COMPANY NAME does, good customer service, and creating a pleasant
environment for customers will be important to implementing the company's business
plan.
5.1 Competitive Edge
COMPANY NAME wants to set itself apart from other beauty salons that may offer only
one or two types of services. Having come from such a salon, Karen and Janet have
realized, from talking with her clients, that they desire all of the services that the
company is proposing, but they remain frustrated because they must get their hair done
at one place, and skincare done at another. Although the focus of COMPANY NAME is
hair services, the company does wish to offer clients the convenience of these other
services in one location.
There are a few salons like this, but they are mainly in the outlaying parts of Lake
City and surrounding areas. COMPANY NAME wishes to offer a middle ground for
those clients who can't quite afford those high-end luxury salons.
The business atmosphere will be a relaxing one where clients can kick back and be
pampered. Soft drinks will be offered to clients as they enter for service. Televisions will
be located in the waiting and hair-drying area.
5.2 Marketing Strategy
COMPANY NAME's marketing strategy is a simple one: satisfied clients are the
company's best marketing tool. When a client leaves the business with a new look, he
or she is broadcasting our name and quality to the public. Most of COMPANY NAME
clients will be referrals from existing clients.
COMPANY NAME‘s research has shown that word of mouth is the best advertising for
this type of business. The salon will, however, run specials throughout the
week. COMPANY NAME will also ask clients for referrals, and reward them with
discounted or free services depending on the number of clients they bring. The
salon will also offer discounts to the new clients who have been referred. There are
plans for a lottery that will offer a free trip to, say, Cancun. A client would simply refer
new clients to us, and COMPANY NAME will place a card in a box for each client he or
she brings. The more they bring the more chances they have of winning the trip.
5.3 Sales Strategy
The sales forecast monthly summary is included in the appendix. The annual sales
projections are included here in Table 5.2.
5.3.1 Sales Forecast
The following table and charts show COMPANY NAME projected sales. The
company expects income to increase steadily over the next three years, as the
reputation of the salon, its stylists and services become apparent to the general public.
Second year revenues also anticipate the addition of one new stylist.
Table: Sales Forecast
Sales Forecast
2011
2012
2013
Stylist #1
$49,600
$57,040
$65,596
Barber #1
$16,800
$19,320
$22,218
Stylist #2
$22,800
$25,622
$29,465
Stylist #3
$0
$22,000
$24,000
Product sales
$9,600
$10,000
$11,000
Total Sales
$98,800
$133,982
$152,279
Direct Cost of Sales
2011
2012
2013
Product Costs
$4,320
$4,300
$4,400
Other
$2,400
$2,400
$2,400
Subtotal Direct Cost of Sales
$6,720
$6,700
$6,800
Sales
5.4 Milestones
The milestones table and chart show the specific detail about actual program activities
that should be taking place during the year. Each one has a starting date, ending date,
and budget. During the year COMPANY NAME will be keeping track of implementation
against plan, with reports on the timely completion of these activities as planned.
Table: Milestones
Milestones
Milestone
Start Date
End Date
Building Expense
9/30/2010
1/30/2011 $25,000
Owners
Acquire Equipment
11/1/2010
1/30/2011 $75,000
Owners
Supplies
9/30/2010
1/30/2011 $20,000
Owners
Launch Advertising
Campaign
12/15/2010 1/30/2011 $5,000
Owners
Attain Inventory of
Beauty Products
1/1//2011
Owners
Totals
Budget
1/15/2011 $2,000
$127,000
Manager Department
6.0 Management Summary
COMPANY NAME will be organized and managed in a creative and innovative fashion
to generate very high levels of customer satisfaction, and to create a working climate
conducive to a high degree of personal development and economic satisfaction for
employees.
Training classes to help improve employee product knowledge and skills will be
conducted on a regular basis. As the business grows, the company will consider
offering an employee benefit package to include health and vacation benefits for
everyone.
6.1 Personnel Plan
The personnel plan calls for a receptionist who will greet customers and receive
payments for services and products. Everyone but the receptionist will be contract
workers, and will be paid a sliding commission scale based on the amount of revenue
created. Future plans include the hiring of an addition beauty stylist as the business
expands.
Table: Personnel
Personnel Plan
2011
2012
2013
Owner (Stylist)
$24,000
$25,000
$26,000
Receptionist
$14,400
$15,120
$15,876
Shampoo Tech
$12,000
$12,400
$13,000
Total People
3
4
5
Total Payroll
$50,400
$52,520
$54,876
7.0 Financial Plan
COMPANY NAME's goal is to be a profitable business beginning in the first month. The
business will not have to wait long for clients to learn about it since the stylists will
already have an existing client base.
7.1 Start-up Funding
COMPANY NAME’s start-up costs are detailed above, in the Start-up Table.
Table: Start-up Funding
Start-up Funding
Start-up Expenses to
Fund
$138,817
Start-up Assets to
Fund
$500
Total Funding
Required
$139,317
Assets
Non-cash Assets
from Start-up
$0
Cash Requirements
from Start-up
$500
Additional Cash
Raised
$0
Cash Balance on
Starting Date
$500
Total Assets
$500
Liabilities and Capital
Liabilities
Current Borrowing
$0
Long-term Liabilities
$0
Accounts Payable
(Outstanding Bills)
$0
Other Current
Liabilities (interestfree)
$0
Total Liabilities
$0
Capital
Planned Investment
Owner
$500
Investor
$0
Additional
Investment
Requirement
$138,817
Total Planned
Investment
$139,317
Loss at Start-up
(Start-up Expenses)
($138,817)
Total Capital
$500
Total Capital and
Liabilities
$500
Total Funding
$139,317
7.2 Important Assumptions
The financials that are enclosed have a number of assumptions:
Revenues will grow at an annual rate of 15%, increasing 20% in November and
December due to a historical jump in revenues at this time of year. The
company anticipates this increase to stay steady throughout the following year to
account for the normal flow of new clients coming into the salon. Estimates for sales
revenue and growth are intentionally low, while anticipated expenses are exaggerated
to the high side to illustrate a worst case scenario.
Product sales are a minimal part of the company's market. COMPANY NAME is not
quite sure how much revenue will be derived from products, so the company took a lowball approach.
7.3 Break-even Analysis
The break-even analysis shows that COMPANY NAME has a good balance of fixed
costs and sufficient sales strength to remain healthy. This calculation is focused on
service sales, and excludes costs related to product sales. This conservative forecast
shows the salon just passing the break-even point throughout most of the first year,
but the company expects actual sales to be higher.
Table: Break-even Analysis
Break-even Analysis
Monthly Revenue Break-even
$7,800
Assumptions:
Average Percent Variable Cost
7%
Estimated Monthly Fixed Cost
$7,269
7.4 Projected Profit and Loss
The following table shows very conservative profit and loss projections for the next three
years. The table includes the payments for all independently contracted stylists and
technicians, as well for all regularly occurring supply expenses associated with service
sales.
Table: Profit and Loss
Pro Forma Profit and Loss
2011
2012
2013
Sales
$98,800
$133,982
$152,279
Direct Cost of Sales
$6,720
$6,700
$6,800
Other Costs of Sales
$0
$0
$0
Total Cost of Sales
$6,720
$6,700
$6,800
Gross Margin
$92,080
$127,282
$145,479
Gross Margin %
93.20%
95.00%
95.53%
Payroll
$50,400
$52,520
$54,876
Marketing/Promotion
$1,200
$1,200
$1,200
Depreciation
$8,146
$8,146
$8,146
Rent
$10,800
$11,124
$11,458
Utilities
$2,400
$4,200
$4,200
Insurance
$1,200
$1,200
$1,200
Independently contracted stylists
$7,087
$7,300
$7,519
Supplies
$6,000
$6,000
$6,000
Expenses
Total Operating Expenses
$87,233
$91,690
$94,599
Profit Before Interest and Taxes
$4,847
$35,592
$50,880
EBITDA
$12,993
$43,738
$59,026
Interest Expense
$0
$0
$0
Taxes Incurred
$1,454
$10,678
$15,264
Net Profit
$3,393
$24,914
$35,616
Net Profit/Sales
3.43%
18.60%
23.39%
7.5 Projected Cash Flow
COMPANY NAME expects to manage cash flow over the next three years simply by the
growth of the cash flow of the business. The business will generate more than enough
cash flow to cover all of its expenses.
Table: Cash Flow
Pro Forma Cash Flow
2011
2012
2013
Cash Sales
$98,800
$133,982
$152,279
Subtotal Cash from Operations
$98,800
$133,982
$152,279
Sales Tax, VAT, HST/GST Received
$0
$0
$0
New Current Borrowing
$0
$0
$0
New Other Liabilities (interest-free)
$0
$0
$0
New Long-term Liabilities
$0
$0
$0
Sales of Other Current Assets
$0
$0
$0
Sales of Long-term Assets
$0
$0
$0
New Investment Received
$150,000
$0
$0
Subtotal Cash Received
$248,800
$133,982
$152,279
Expenditures
2011
2012
2013
Cash Received
Cash from Operations
Additional Cash Received
Expenditures from Operations
Cash Spending
$50,400
$52,520
$54,876
Bill Payments
$33,690
$47,595
$53,210
Subtotal Spent on Operations
$84,090
$100,115
$108,086
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out
$0
$0
$0
Principal Repayment of Current
Borrowing
$0
$0
$0
Other Liabilities Principal Repayment
$0
$0
$0
Long-term Liabilities Principal
Repayment
$0
$0
$0
Purchase Other Current Assets
$22,000
$0
$0
Purchase Long-term Assets
$100,000
$0
$0
Dividends
$0
$0
$0
Subtotal Cash Spent
$206,090
$100,115
$108,086
Net Cash Flow
$42,710
$33,867
$44,193
Cash Balance
$43,210
$77,078
$121,270
7.6 Projected Balance Sheet
As shown in the balance sheet, COMPANY NAME expects a healthy growth in net
worth.
Table: Balance Sheet
Pro Forma Balance Sheet
2011
2012
2013
Cash
$43,210
$77,078
$121,270
Other Current Assets
$22,000
$22,000
$22,000
Total Current Assets
$65,210
$99,078
$143,270
Long-term Assets
$100,000
$100,000
$100,000
Accumulated Depreciation
$8,146
$16,292
$24,438
Total Long-term Assets
$91,854
$83,708
$75,562
Total Assets
$157,064
$182,786
$218,832
Liabilities and Capital
2011
2012
2013
Accounts Payable
$3,171
$3,978
$4,409
Current Borrowing
$0
$0
$0
Other Current Liabilities
$0
$0
$0
Subtotal Current Liabilities
$3,171
$3,978
$4,409
Assets
Current Assets
Long-term Assets
Current Liabilities
Long-term Liabilities
$0
$0
$0
Total Liabilities
$3,171
$3,978
$4,409
Paid-in Capital
$289,317
$289,317
$289,317
Retained Earnings
($138,817)
($135,424)
($110,510)
Earnings
$3,393
$24,914
$35,616
Total Capital
$153,893
$178,807
$214,423
Total Liabilities and Capital
$157,064
$182,786
$218,832
Net Worth
$153,893
$178,807
$214,423
7.7 Business Ratios
Business ratios for the years of this plan are shown below. Industry profile ratios based
on the Standard Industrial Classification (SIC) Index code 7231, Beauty Shops, are
shown for comparison.
Table: Ratios
Ratio Analysis
2011
2012
2013
Industry
Profile
0.00%
35.61%
13.66%
3.38%
Other Current
Assets
14.01%
12.04%
10.05%
47.76%
Total Current
Assets
41.52%
54.20%
65.47%
62.16%
Long-term
Assets
58.48%
45.80%
34.53%
37.84%
Total Assets
100.00% 100.00% 100.00% 100.00%
Current
Liabilities
2.02%
2.18%
2.01%
24.44%
Long-term
Liabilities
0.00%
0.00%
0.00%
22.82%
Total Liabilities
2.02%
2.18%
2.01%
47.26%
Net Worth
97.98%
97.82%
97.99%
52.74%
Sales Growth
Percent of Total
Assets
Percent of
Sales
Sales
100.00% 100.00% 100.00% 100.00%
Gross Margin
93.20%
95.00%
95.53%
100.00%
Selling, General 89.76%
&
Administrative
Expenses
76.40%
72.15%
69.91%
Advertising
Expenses
8.24%
6.08%
5.35%
2.38%
Profit Before
Interest and
Taxes
4.91%
26.56%
33.41%
2.30%
Current
20.56
24.91
32.50
1.64
Quick
20.56
24.91
32.50
1.26
Total Debt to
Total Assets
2.02%
2.18%
2.01%
60.85%
Pre-tax Return
on Net Worth
3.15%
19.91%
23.73%
11.12%
Pre-tax Return
on Assets
3.09%
19.47%
23.25%
4.35%
Main Ratios
Additional Ratios
2011
2012
2013
Net Profit Margin
3.43%
18.60%
23.39%
n.a
Return on Equity
2.20%
13.93%
16.61%
n.a
Accounts Payable
Turnover
11.62
12.17
12.17
n.a
Payment Days
27
27
29
n.a
Total Asset
Turnover
0.63
0.73
0.70
n.a
Debt to Net Worth
0.02
0.02
0.02
n.a
Current Liab. to
Liab.
1.00
1.00
1.00
n.a
Activity Ratios
Debt Ratios
Liquidity Ratios
Net Working
Capital
$62,039 $95,099 $138,861 n.a
Interest Coverage
0.00
0.00
0.00
n.a
Assets to Sales
1.59
1.36
1.44
n.a
Current Debt/Total
Assets
2%
2%
2%
n.a
Acid Test
20.56
24.91
32.50
n.a
Sales/Net Worth
0.64
0.75
0.71
n.a
Dividend Payout
0.00
0.00
0.00
n.a
Additional Ratios
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